The currency in the classroom

A teacher ran a term-long experiment in which students earned tokens for completed work and could spend them on small privileges. By week six the tokens had developed almost every feature of a currency, including two that nobody had designed.

The first was a price level. Privileges had been given fixed costs, but students traded tokens among themselves for favours, and the exchange rates that emerged did not match the official ones. A privilege priced at ten tokens was changing hands informally for six, which told the teacher that the official price was wrong rather than that the students were cheating.

The second was inflation. Because tokens were awarded for completed work and the amount of work rose towards the end of term, the supply grew faster than the supply of privileges, and the informal rate drifted. Students with saved tokens lost value and noticed, which produced the term's most engaged lesson: a class argument about whether the teacher should have promised a fixed rate or a fixed supply.

What made the exercise useful was not the economics content but the order of discovery. The students met the problem before the vocabulary. By the time 'inflation' was defined, every one of them had an example in their own pocket and a grievance, and the definition landed on something already understood rather than creating the understanding.

The teacher's note at the end of term is the most quoted part of her write-up. She had planned a lesson about money and had accidentally run one about promises, because the arguments that mattered were all about what the tokens had been guaranteed to be worth.